Technology creation and monetary transmission

Uluc Aysun, Sewon Hur and Zeynep Yom

No 2025-02, Working Papers from University of Central Florida, Department of Economics

Abstract: We build and embed an endogenous growth mechanism into an otherwise standard New Keynesian DSGE model to investigate the transmission of monetary policy. Endogenous growth is determined by the R&D expenditures of monopolistically competitive firms and monetary policy, through its effects on these expenditures, can have supply side effects in addition to its usual demand side effects. After solving the model and estimating it with a Bayesian methodology, we find that R&D activity amplifies the responses to monetary policy shocks. An empirical investigation that uses firm-level COMPUSTAT data provides support for this result. Specifically, we find that monetary policy transmission operates more strongly through R&D intensive firms.

Keywords: R&D; endogenous growth; DSGE; monetary policy; COMPUSTAT. (search for similar items in EconPapers)
JEL-codes: E24 E32 O30 O33 (search for similar items in EconPapers)
Pages: 63 Pages
Date: 2025-04
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